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Is Facebook sacrificing virality for credit’s sake?

By May 11, 2010No Comments3 min read

If you’ve been paying attention to the facebook platform like I have for the last few years, you’ll notice an overarching theme emerging. Quite brilliant one if I might add. Facebook has managed to build up this enormous eco-system around their platform, generating at least 750M in gross revenue, and now it wants to stake their claim as the financial engine of this platform. Not happy being “just” the social glue of the web, facebook is playing a risky game with its developers by making it almost a pay to play platform.

Several developers are quoted as saying it costs $3M to get up to 1Million actives on the facebook platform now. That seems to be the tipping point you need to catapult yourself to a huge audience, but there is no way to get there for free anymore. By removing the viral elements of the platform bit by bit (the highest reported K-Factor is now 0.6), Facebook manages to force developers into their ad system to grow their audiences. Chris Dixon referenced this the other day in his post the Facebook-Zynga hold up. Saying that facebook is trying to hold Zynga hostage by forcing them into their payments platform (Credits), where it can take 30% of each transaction. Once they’ve got them locked into their ad system for growth, they can lock them into their payment system for monetization.

So let’s take a quick look back at how this has evolved.
2007: Platform launches
Super viral, no holds barred tools
Facebook isn’t monetizing, but using platform to grow their own audience
Tons of apps shoot to a million or more daily users

2008: Platform revisions
Facebook tries to combat spam, cuts a bit of viral features out
Experiments with their ad platform
Tries to clean up platform
Connect emerges

2009: Credits & Viral neutering
18 months after announcing credits, they start rolling it out
Ad network is more integral part of fb ecosystem
Notifications wiped out
Connect pushed hard

2010: sticking their fingers in every pot
Ad network is primary form of discovery for all new apps
Credit system is pushed harder
“Opening” of the platform
Facebook opens their doors in order to get itself out, not to let you in.
Connect loses its branding

2011: behavior + social graph
web wide like buttons are the trojan horse of behavioral data mining
what else?

Free for all > force into ad system > force into credits to monetize > ?

My theory is that facebook saw virality as the easiest tool to sacrifice in order to guarantee their revenue growth. Now I still think the Facebook platform is a great tool to build upon, but have been advocating for years about multi-pronged approaches. Now it seems like you should work with FB to get as much out of them while you can, but don’t put all your eggs in one basket.